Weekly Feed Market Commentary

Published 17 December 14

Feed grains

It has been another particularly volatile week for wheat prices. Despite May-15 UK feed wheat futures trending downwards throughout most of the week, on Friday, fears resurfaced that Russia may lower grain exports in order to help solve its problem of high domestic inflation. Yesterday (16 Dec), May-15 UK feed wheat futures settled at £139.00/t, up £4.05/t on the previous week. This rebound in the trend for the UK wheat prices was also echoed across both the May-15 Paris and Chicago wheat futures contracts.

While the uncertainty over Russia’s intentions is providing support to prices, this could be short-lived, given the fundamentally bearish nature of global supply dynamics. In their updated World Agriculture Supply and Demand Estimates (WASDE) released last week (10 Dec), the USDA revised their forecasts for global output of wheat and maize higher on their earlier estimates. World wheat output is now forecast at a record 722.2Mt, mainly due to higher output in Canada. The most recent forecasts peg EU maize production 14.6% higher compared with last year, at 73.6Mt.

In October, for the first time since May 2012, HMR&C reported that the volume of wheat exported by the UK was higher than the volume imported. The UK exported 218.6Kt of wheat in October, the highest monthly total so far this season. However, this is still a lot of work to be done, as the export pace is lagging behind that of previous large production years.

In addition, the HMR&C data indicated that the UK has imported 486.0Kt of maize so far this season, just 30Kt less than at the same point in time in 2013/14 – a record year for maize imports. The price competitiveness of maize relative to feed wheat has improved further in recent weeks, based on both delivered prices to Rotterdam and UK imported prices. This suggests increased competition between wheat and maize for animal feed demand.

Protein meal

The events of last week also introduced a degree of volatility to the oilseeds markets. Prior to the release of the USDA WASDE, Chicago soyabean prices rose on the anticipation of lower US stocks. With global production raised higher, this subsequently initiated a decline in prices. The bearish sentiments for oilseeds were boosted further last week, with bumper soyabean crops forecasted for both Brazil and Argentina.

In spite of the predominantly bearish supply fundamentals, continued strong demand for US soyabeans remains. The US National Oilseed Processors Association’s (NOPA), latest crush data (15 Dec) showed that a record amount of soyabeans were crushed in November (4.39Mt), the fourth largest crush recorded. However, because this figure was less than that expected by trade estimates, this resulted in a decline in Chicago soyabean futures prices, falling by $8.45/t since Friday’s close, to settle at $380.81/t yesterday (16 Dec).  

UK rapemeal (34%, Ex-mill Erith, December delivery) was £186.00/t on Friday (12 Dec), up £5.00/t on the previous week. Hi-Pro soyameal (Ex-store East Coast, December delivery) was £338.00/t on Friday, up £1.00/t on the week.